Pollution liability risk on the rise for SA businesses, directors and employees

21 November 2017: Pollution liability is becoming an increasingly intricate issue in South Africa and businesses, as well as the relevant directors and employees in their personal capacity, are facing an increased risk of being held criminally and civilly liable for causing damage to the environment.

Gillian Wolman Head of Litigations Risk at RBS

A person or business who pollutes the environment if found guilty can be liable on conviction to a fine of up to R5 million or to imprisonment for a period not exceeding five years.

This according to Johannes du Plessis, legal advisor at RBS (Risk Benefit Solutions Pty Ltd), a registered financial services provider who says that should a business cause pollution, either as a result of its daily activities or due to an accidental spill, the business as well as the relevant directors and employees may be held responsible for more than just the clean-up costs.

“Pollution liability not only applies to the cost of repairing the damages to the environment. It can also be argued in court that the businesses and business owners that caused the environmental damage, are liable for the psychological impact that their activities may have had. One example of where this could be the case is if the guilty party was responsible for polluting a site with cultural or spiritual significance to the community.”

Du Plessis says that in the case of a second or subsequent conviction, the business can be fined up to R10 million or the owner can face imprisonment for a period not exceeding 10 years.

“However, such fines and penalties only refers to the criminal liability faced. In a civil case, the business could be expected to pay significant amounts in compensation to the local community for causing harm to their health or being responsible for mental distress.”

After that, there is also the expense charged against the business for reinstating the environment, which could bankrupt the business, notes Du Plessis. “Furthermore, individuals or businesses can still be held liable if the effects of their pollution is discovered years after the actual pollution took place, which means that even long after a business has closed its doors, it is possible that the relevant directors and employees could still be held responsible for repairing the damage.”

Gillian Wolman, Head of Litigation Risk at RBS says that businesses and their relevant directors and employees need a policy to protect third parties from pollution, as well as themselves for their liability therefore. “Many people incorrectly assume that if they have general liability and property insurance, that they are covered for pollution liability as well. However, these policies exclude liability for pollution or damage to the environment more often than not, specifically because of the fact that it is such a complex issue.” 

Wolman explains that an environmental liability policy typically covers personal injury and property damage. “A business may also be covered for clean-up costs to remove the hazardous substances and restore the property to working condition. Some insurance companies also allow the policyholder to add coverage for legal fees and investigation costs involved in pollution-related incidents.”

She adds that businesses need to make sure that gradual pollution is also covered for instances where the damage is discovered after the fact. “A client should not just assume that his policy covers him for liability long after the event. Traditional public liability insurance policies usually exclude gradual pollution, and the cover offered under a gradual pollution liability policy may vary from insurer to insurer.”

“An increasing number of businesses are being taken to court for environmental liability in South Africa, and the issue is just going to increase in its complexity in future. Businesses need to take the necessary steps to manage this risk now,” Du Plessis concludes. 

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